A strategic plan is vital for anyone that wants to have a stress-free and comfortable retirement. There are several methods to save and plan towards your retirement.
Some of these methods are 403(b), 401(k), or you may even open an IRA. You can click here to read a comparison between IRAs and 401(k).
With an IRA you could invest in ETFs, stocks, bonds, mutual funds, and so on. You can also opt for self-directed individual retirement accounts. This type of IRA is not the regular type as it allows investors to hold several unconventional assets like real estate, arts, collectibles, and even precious metals.
To hold precious metals in an IRA you would need to open one that is specifically meant to hold this asset class. While the process to do this may look complicated from the surface, once you get closer it would become simple to you.
The first step you need is to get a custodian. In simple terms, the custodian is usually an IRS-approved financial organization like a trust company or bank that oversees the account’s transactions.
If you are here, our bet is you are already well aware of the roles the custodian plays. However, there are certain things that you need to know about your IRA even though your custodian is the one managing it.
Hence, in this read, we will be discussing some of these important things. Let us start from the very beginning.
What exactly is An IRA?
IRA is an acronym that means individual retirement account. It is a type of saving account which is tax-advantaged and a means through which people save for long terms.
These accounts are put in place to help people save towards their retirements and can be opened by any person that has ever earned income. They can be opened via banks, online brokerages, personal brokers, or investment companies.
However, in this article, we are focusing on a particular type of IRA known as gold (precious metals) IRAs. With this special IRA, investors can hold and invest in precious metals such as gold, platinum, palladium, and silver with IRA. Gold IRAs may either be Roth or traditional.
Types of Gold IRA
Knowing the account type you want will help the whole process get along faster once you have gotten your custodian. As we have said, there are two alternatives when it comes to precious metals. You can either choose a Roth or a traditional one.
The major difference between these two types is how the assets are taxed. With a traditional one, the taxes are paid when the asset is withdrawn while taxes are paid beforehand with a Roth account.
Storage
When valuable metals are bought via an IRA, the investor cannot store the assets by themselves. Rather the assets have to be stored in depositories or approved banks. While this law is implemented by the IRS, some companies have started marketing “self-storage” gold IRAs. You can visit https://incomeinsider.org/home-storage-gold-ira/ to learn more about this.
Know that while these companies are advertising these self-storage accounts, their legalities are quite questionable. If you get involved with any of these companies, you may get fined or penalized by the IRS for storing your gold yourself.
Hence, it is better to get a reputable and approved depository to store your assets to avoid getting into trouble. Most custodians often recommend depositories to their clients so you may not even have to do the searching by yourself. Just make sure you properly research any depository that was recommended to you.
Fees
Setting up a precious metal retirement plan is often more costly than setting up a regular one. If you choose to do this, then you have to bear in mind that you would be paying some extra fees that a regular account wouldn’t have. For instance, a storage fee is usually paid to the depository that would hold your asset since you can’t hold it yourself.
You will also be charged for set-up. Your custodian would also have to be paid a management fee from time to time. This fee often varies from one custodian to the other. It however often ranges between 250 dollars to 350 dollars in the first year of the investment. You may be charged between 150 dollars to 250 dollars in subsequent years.
Typical retirement accounts often have much lower or even no fees.
Contribution Limits
Another thing you need to know as you work with your custodian is that the amount which you can invest in is limited. The contribution limit often depends on the investor’s age.
People under 50 can invest up to six thousand dollars annually. Once a person turns 50 years old, then they can invest up to seven thousand dollars.
How the Account is Funded
Once the account is open, it will have to be funded before the assets are bought into it. You can fund your account in 3 different ways:
1. Cash Funding
You can fund the account via wire transfer, check, or even cash. It is similar to funding a normal investment or savings account. Your bank may charge a fee for the wire transfer so bear this in mind.
2. Rollover
If you already have a retirement account, then you can roll the funds in it into the precious metal account.
If you opt for this, then you have to speak to the administrator of your current account so they can instruct you on how to go about the rollover. Also, you can simply remove the fund out of the old account and transfer it into the gold one.
However, if you opt for this, then ensure you make the deposit into the gold account before 60 days after you withdrew it from the old one elapses. If you don’t do this with the 60 days limit, then you may be charged a 10 percent penalty.
3. Transfer
Again, you would need an existing IRA for this. It is often a simple process as the funds in the existing account are simply transferred into the new one. Transfers are usually penalty and tax-free.
Finally, you should ensure you take out time to properly research the custodian before you begin the business with them. You can read reviews for gold ira custodians to find out whether the company you are considering is reputable or not.
Conclusion
Knowing all the things discussed in this article will help you know what is happening as you work with the custodian of the asset. While the custodian is the manager of the account, having a little knowledge about the whole business is a great way to stay informed.
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